A product has demand given by Q = 30 – 2P, where P here means buyer price of course. Supply is given by Q = P, where P is seller price here. First, with no tax in this market, find equilibrium price and quantity. Next, suppose that an excise tax of $3 is imposed on the sellers for each unitthey sell. In this case, determine the equilibrium buyer and seller prices and market quantity. How is the tax shared between buyers and sellers?

Question

A product has demand given by Q = 30 – 2P, where P here means buyer price of course. Supply is given by Q = P, where P is seller price here. First, with no tax in this market, find equilibrium price and quantity. Next, suppose that an excise tax of $3 is imposed on the sellers for each unit
they sell. In this case, determine the equilibrium buyer and seller prices and market quantity. How is the tax shared between buyers and sellers?

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